Accounting Capstone Essay

It appears to me that both companies have had some weaknesses and have shown some improvements.I am wary of Pepsico because its current liabilities have increased faster than its assets. However, Coca-Colas assets have decreased along with its liabilities.Both companies have increased inventory, though Pepsicos increase has been much higher than Coca-Colas (9.86% to 0.28%). Normally, this is cause for concern, still both companies inventory turnover also has improved.There ar some(prenominal) former(a) pros and cons for both companies. One reason to be cautious round either one is that they both have weak acid runnel ratios. Pepsicos fell from 0.95 to 0.87. Coca-Colas fell from 0.81 to 0.72). An acid-test ratio of slight than 1 shows that a guild will have difficulty paying its debts.My final exam decision is based on profitability.Pepsicos profit margin decreased from 14.4% to 12.5%.Coca-Colas decreased from 22.3% to 21.1%.See moreManifest Destiny stressBoth have decreased , but Coca-Colas is much higher. So, I would lease Coca-Cola.What Does Acid-Test Ratio Mean?A stringent indicator that de vergeines whether a potent has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is distant more strenuous than the working bang-up ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.Calculated byInvestopedia explains Acid-Test RatioCompanies with ratios of less than 1 cannot pay their current liabilities and should be looked at with extreme caution. Furthermore, if the acid-testratio is much lower than the working capital ratio, it means current assets are highly dependent on inventory. Retail stores are examples of this type of business.The term comes from the way gold miners would test whether their findings were real gold nuggets. Unlike other metals, gold does not corrode in acid if the nugget didnt split up when submerged in acid, it was said to have p assed the acid test. If a companys financial statements pass the figurative acid test, this indicates its financial ace